Introduction

Retail shopping is a different phenomenon today as compared to a few years ago. Technology has changed the world of retail in more ways than one. On one hand, it has enabled the emergence of a more aware consumer and the proliferation of new channels of selling. On the other, for the retailer, technology has helped offer a more personalised shopping experience to the consumer. The data available serve as a tool for enhancing the efficacy of operations at the store level, with respect to merchandising, customer relationship management (CRM), supply chain, warehousing and logistics.

Historically, the retail business has been an early adopter of technology, as the need to capture accurate information has always been critical. Technology enables the retailers to connect and share vital data with suppliers, vendors and even its own stores, thereby, enabling stock availability and sharing of other critical information. The analysis of this data is now helping many a retailer in creating a differentiation.

Significance of Technology in Retail

Technology has been applied to some of the unique requirements of the retail business, such as, the need for product identification, the need for quick billing and settlement of bills electronically and specialized logistics applications. The use of information technology in retail includes a wide swathe of technologies covering software, hardware and wireless communication.

As can be seen from following diagram, it is the overall business strategy adopted by a retailer which determines the information that is required. For example, if a retailer is an omni-channel retailer, there is a need for integrating the data across channels with respect to sales, merchandise availability, inventory to be ordered, etc., to enable accurate decision-making, often at a middle management level. This is termed as the information systems strategy or what was earlier known as the Management Information System.

The kind of information required, i.e., the depth of this information will in turn determine the set of information technology systems to be deployed.

An important element is the fact that single customer transaction has implications on a wide range of areas. A single transaction impacts multiple areas. Typically to record this transaction, a bar code scanner will be used to scan the item/s being purchased. The customer may choose to pay cash or may pay by way of credit/debit card/other mode of payment.

Sales would require seeing the consolidated effect of each transaction to understand achievement of targets and take decisions as may be necessary. Merchandising will look at the data in the form of movement of merchandise, which has to be replaced and, therefore, reordered as the case may be. Finance will have to look into the movement of merchandise and the sales in terms of the inflow of cash into the company and payments that have to be made to the suppliers. Marketing may look at the transaction to understand and evaluate new campaigns: sales promotions or spot offers which may be offered.

The development of mobile commerce or M-Commerce enables businesses and consumers to transact on the go, without having to have access a wired computer. Mobile devices like handheld Personal Digital Assistant (PDA) and mobile phones are used for this purpose, and it offers the retailers the opportunity to reach out and sell to consumers anytime and, more importantly, anywhere.

The importance of information technology in retail stems from the importance of data. Data are nothing but information, which aids decision-making. The right data, in the right form to the right set of people at the right time, are one of the greatest tools in the hands of the retailer. Information is always with reference to a particular time frame.

Burch and Grudnitski define information as 'data that has been put into a useful and meaningful context and communicated to a recipient who uses it to make decisions. Information involves the communication and reception of intelligence or knowledge'. (Burch and Grudnitski, 1989) 

Key areas in which technology has an impact in retail are briefly mentioned below:

1. Efficient Stocking of Merchandise

The items purchased provide information on merchandise sold; this is the basis of sales analysis and decisions on replenishment, reordering and merchandise planning. If this information is passed on to the manufacturer, it can help reduce production time. This is particularly true in case of fashion items, which have a very short life cycle. For example, data gathered in this manner may indicate youngsters buying certain styles in jeans or colors in tee shirts. To serve this section of the audience, the retailer may need replenishments faster. The use of technology aids the collection and transmission of information. The trends in sales can be analysed. This helps avoid situations of stock out and also helps spot merchandise or products, timely markdowns and higher inventory turns.

2. Collection of Data

The use of technology aids data collection. Data can be collected about consumers, their purchases and the frequency of buying and typical basket size. This information helps the retailer distinguish the customers who shops at his store frequently and also reward them. For example, information gathered about a customer may reveal preferences for certain brands, this may be used for further communication with the customer regarding promotional offers, etc.

3. Efficiency in Operations

The use of information technology serves as a basis for integrating the functioning of various departments. When a retailer decides to use the power of technology to aid business, the investment in terms of money is usually high. However, the benefits of the use of information technology are many. As process gets automated, the time involved in a particular task is reduced. For example, a person manually billing a customer for purchases made will take a longer time as compared to a person who is needed to scan in the items using the point of sale systems.

It is now a common practice of sharing the information on the sales and the mode of delivery with the customers to enable the tracking of the order. Similarly, various CRM interfaces are also technology based.

The information needs of the retailer largely depend on the size and the spread of the organisation.

With an increase in the number of stores and/or an increase in the number of products sold in the store, gathering of information becomes crucial. Technology plays a vital role in gathering this information and making it available to the right set of persons.

Factors Affecting the Use of Technology

While every retailer may want to harness the power of technology and use it to its optimum advantage, many factors affect its use. The chief among them are:

1. Scale and Scope of Operations

As stated earlier, the size or the scale of operations is the key factor influencing the decision on the type of systems required. In case of a small retailer, the significance is much lower as compared to that for a large chain retailer, who operates at a national or an international level.

2. Financial Resources Available to the Organization

Many a times the financial resources available to the firm for investment in technology are a crucial differentiating factor. The retailers in mature markets may invest significantly higher amounts in technology than their Indian counterparts. In India, investment in technology varies significantly with the type and size of operations and the estimated payback period.

3. Nature of the Business

The industry that the retailer operates is an important factor affecting the requirement and the use of technology. For example, a retailer who is a part of the fashion industry, needs to track consumer demands and changes in buying patterns at a much faster pace than a retailer operating in the consumer durables industry. While both need technology, the changes in demand are significantly higher in the fashion industry. By analysing sales data, changes in buying patterns can be tracked. Changes can be made at the production level if this information is passed on to the consumer. On the other hand, an increase in demand for certain products can also be tracked and production can be realigned much earlier to avoid a stock out situation.

4. Human Resources Available

The retailer needs people to build and implement technology solutions. Thus, this requires people who understand the complexities of the business that the retailer operates in and at the same time the type of technology that will suit the business. They not only need to implement the system but also to train people within the organization on its use and applications. It is for this reason that information technology is, many a time, termed as the backbone of retail.

Applications of Technology

Over the years, many applications of technology have developed which have made a deep impact on the way retail business is conducted. In this section, we examine some of the applications of technology, relevant to retailers. At an organizational level, the retailer may use Electronic Data Interchange (EDI) to facilitate the sharing of information.

Electronic Data Interchange

Electronic Data Interchange is defined as the exchange of business information, through standard interfaces by using computers. It can also be interpreted as transmission of business data between organisations in a computerised format that does not require the keying of information. Since EDI is defined as the exchange of electronic documents between organisations, the EDI acronym has also been sometimes interpreted as Electronic Document Interchange.

EDI is at the core of the overall concept of Electronic Commerce (EC). The advantages of the use of EDI are listed below:

• Saves time, as the transmission of data can be immediate. If there is an EDI exchange between a retailer and the supplier, the supplier at his end can spot trends in purchase and accordingly realign production.

• A manual error, which may arise while keying in data, is also avoided.

• It reduces costs involved in paper handling, filing, storage and mailing costs.

• It serves as a tool for strengthening the relationship between the retailer and supplier.

• Large retailers have long believed in the power of electronic communication with their supply chain partners. Since the advent of EDI, these retailers have been steadily investing in such systems. By adopting B2B1/EDI, retailers and wholesalers are able to harness substantial tactical and strategic benefits over a short period of time.

The key areas where sharing of information is needed in a retail organization is illustrated in diagram below

As can be seen in diagram, the heart of retail is the store operations this may be in the form of a physical store, an e-tail site or may include both as the case may be. The transaction management system would encompass various areas as can be seen in the diagram and would include sharing of information with suppliers and vendors, the inventory management system, the logistics and warehousing for receipt of the merchandise and the subsequent delivery to stores or to the customer. It would also encompass ensuring that timely information is shared with the customers in terms of day, date and time of delivery, customer returns/exchange and last but not the least the tools for CRM or experience management as it may be termed.

Each of the area can also be viewed from the analytics point and would translate to vendor, logistics, operations or customer analytics as the case may be, and aid better decision-making in the organisation. All of this may operate on different platforms including cloud, etc.

Database Management, Data Warehousing, Data Mining

A simple purchase at any retail store can enable the store to gather a vast amount of information about its customers and products. The use of systems to organize, retrieve, search and manage that data is termed as database management. Data can be with respect to products, customers, vendors and suppliers or a combination of them put together.

Elements of database management are data warehousing and data mining. Let us take the example of a customer who buys a pair of cotton chino trousers from a large department store chain in Mumbai. The customer is also a member of the loyalty programme run by this chain and visits the store frequently.

By swiping the customer loyalty card at the time of purchase, the entire information system starts functioning. The store's computer sends the information to the company's central computer, which usually hosts the data warehouse. From this data warehouse, the organization is able to retrieve data that will give important information about the purchase made, the total number of purchases made, the colour, size and demographic data of the customer.

The data warehouse is at the core of the system that enables the retailer to gather, manage and utilize the information needed by him to remain competitive in today's fast changing marketplace.

It is now necessary to track changes in consumer demand, as consumer loyalty to a retail store cannot be taken for granted. Taken from the term mining, which means digging out something from the earth, data mining refers to the extraction of data for specific applications with the use of technology. The concept of data mining is not new, as for many years statisticians used to mine data manually. Technology has enabled the automation of the data mining process and integrating it with a data warehouse enables the availability of data in a manner relevant for various businesses. Data mining can help extract information from a database that the user did not know existed. Finding a relationship between variables and customer behaviours that is non-intuitive is what data mining hopes to find.

The information unearthed by data mining can also help the CRM Process. By identifying specific market segments and their buying behavior, it is possible to develop campaigns, promotions and offers which are aligned to the needs, wants and attitudes of the customer thereby offering value as perceived by the customer.

Radio Frequency Identification (RFID): 

Radio Frequency Identification or RFID has transformed the way business is being conducted and monitored across the supply chain. In 1948, it was invented by Harry Stockman, yet had to wait its turn before emerging onto the common market. The lack of infrastructure kept RFID quiet until the late 1990s. Market for RFID) picked up due to initiatives of retail giant, Wal-Mart. Various retailers like Wal-Mart and Metro have made it mandatory for their suppliers to tag shipments and goods coming into distribution centers and stores with RFID tags within a fixed time frame. Others like Target, CVS and Home Depot also have plans to roll out timelines and pilot projects for RFID implementation.

Radio Frequency Identification can be described as a wireless bar code which provides wireless communication between objects and readers. RFID uses tags or transponders that collect data and manage it in a portable, changeable database. It has the ability to identify and track products and equipment in real time without contact or line-of-sight. These tags unlike bar codes offer the possibility of reading, writing, transmitting, storing and updating information.

RFID chips come in a wide range of packaging options that are reusable and can withstand harsh environment. These chips are also capable of performing under harsh, rugged conditions.

While there are a great deal of similarities between the bar code and the RFID tag, the chief differentiator is the level of technology used. Bar coding scans a printed label with either optical laser or imaging technology, while RFID scans or interrogates a semiconductor tag using radio frequency (wireless) technology.

Apart from inventory tracking, this technology enables the retailer to track the tasks being performed by the employees within the store and also enables them to be more productive and responsive to customers' needs by enabling the tracking of customer profiles, transaction histories, levels of stock and other data which may affect the actual sale from taking place. For example, a customer selects the last of a particular item on the store shelf; a restock notice instantly appears on a sales associate work pad; a nearby digital display promotes a likely substitute purchase to the consumer; and the customer's profile is updated to include the new purchase. This new data then impact future actions and reactions.

We now look at the applications in technology which are more front-facing or customer facing. Some basic terms which are heard are Clienteling, Show rooming and Web rooming are briefly explained below:

Clienteling

This allows the sales associates to browse through the customer profile, customer buying pattern, etc., and have personalised dialogue with the customer about products, new products launched and share product recommendations based on customer buying history, offers and promotions, etc.

Show Rooming

This is the process in which a customer visits a brick and mortar showroom, gets information and advice on the product and starts browsing online to buy the same product somewhere else. Show rooming is where the customer journey starts in a store and ends on a (usually) competitor's website.

Web Rooming 

This is the opposite of show rooming, where the customer journey starts online for a brand or retailer, and ends in a store. Both require an omni channel customer journey analysis to ensure customer connection through all touch points.

At key area where technology is applied at the front end is the Point of Sale system or the POS as it is commonly known, where the actual sale transaction takes place. A significant change is the method of payment which now includes e-wallets and mobile payments. Digital payments are gaining popularity and a key reason for the same is that it does away with the need for carrying cash or credit/debit cards and often allows for easier and faster checkouts. A few of the e-wallets are also linked with perks like cashback rewards and other promotions.

There is also an increase in the number of payments which may be made by using mobile phones. This is in keeping with the increase in the number of users of mobile phones which has consequently lead to an increase in the payments being affected using the same. Digital payments are increasingly becoming popular and newer technologies are enabling the proliferation of digital wallets. The same is also required from the point of view that many brick-and-mortar retailers now operate through multiple channels including e-retail require integrated systems which synchronizes and streamlines the financial and product information in a centralized dashboard instead of managing two sets of inventories and payment systems.

The POS systems may also be integrated with the CRM solutions which in turn enable the retailer to understand which customers are more loyal and have a greater impact on sales. The customer data collected at the POS may include other than the name of the customer, emails, billing and shipping addresses, order history and loyalty program membership details. The data may then be organized and mapped to buying behaviour and shared with various departments which finally are aimed at enhancing customer conversions and experience.

Bar Codes

Considering that a typical retailer sells at least a few hundred units each day, tracking what is sold, the inventory and then arriving at what needs to be re-ordered becomes a humungous task. This brought out the need for developing a machine-readable system, which could help identify the product across various retail locations and provide information about the product to be associated with it quickly.

The Universal Product Code (UPC) or Bar code, as it is popularly known, was developed from this need. While the first bar code patent was issued in 1952, the retail industry adopted it much later, as to implement a bar code system; hardware to produce the codes and interpret the information contained in them was required. Once this was developed, the grocery retailers were the first to adopt the bar code. Bar coding is one of the IT tools used for automatic data capture. As opposed to manual data entry, which is tedious and prone to inaccuracies and bar coding enables data capture with 100 per cent accuracy and in micro-seconds. Bar codes can be used to represent information related to product attributes, other supplementary information like batch number, manufacturing/expiry dates, consigner/consignee, etc. errors,

In 1972, manufacturers and distributors of 12 European countries formed a council to explore the development of a standard numbering system for Europe, similar to and compatible with

the UPC. The European Article Numbering (EAN) was born as a result. It is a superset of the UPC and is followed in India. Over the years, the usage of bar codes has also proliferated. New types of bar codes seen include the 2D codes like the Quick Response or QR codes which can be scanned even on the phone, and 3D codes which are embossed on products and parts.

Digital Price Tags also Known as Electronic Shelf Label

Electronic Shelf Labels are seen to gain prominence largely in brick and mortar retail stores. The labels are display modules typically attached to the front edge of the product shelf. enables the retailers to adopt a dynamic pricing system, which can be controlled from a central point. At times additional information pertaining to stock levels, the date of expiry (wherever applicable) and other product information may also be displayed. Apart from allowing for dynamic pricing, the electronic display may also be an element which helps save on costs as it does not require price tags to be changed often. For an omni-channel retailer, the digital price tag can enable the same pricing to be adopted across multiple channels.

Beacons

Beacons are small, wireless devices that use Bluetooth technology to send signals to other smart devices which are within a certain location proximity. They were first introduced as I Beacons by Apple in 2013 and have subsequently been adopted by retailers in their quest for providing a personalised experience to the retail shopper. Mobile phones are integral to the usage of beacon technology at retail and often require the customer to have the store application on the phone.

The technology used by the Beacons allows the said mobile phone applications to listen to signals from the beacons, thus, allowing for personalized content to be delivered to the receiver, often in this case the consumer. Communication here is only one way. Thus, beacon technology is seen as a tool which enables proximity marketing and advertising.

Smart Mirrors

Smart Mirrors are technology-enabled mirrors within a physical retail store environment which enable the customer to visualise how the product/outfit will look without trying them on. Some mirrors may also allow for multiple outfits to be compared and sharing the photos with friends and family on social media platforms. Other products, which may go well with the product, may also be illustrated on the mirrors.

Virtual Trail mirrors are also used in the retail environment, and they enable the customers to see how the outfits look on them, without trying them on. The bar code of the product needs to be scanned, and the shopper can view how the products would look as the virtual garments are projected onto their reflection.

Augmented Reality and Virtual Reality

Augmented Reality (AR) and Virtual Reality (VR) are terms which are fast gaining popularity in the retail world. In AR, the world around the customer is used and virtual objects are added to the user's real environment, which in case of retail world be the retail store. Again, this enhances the customer's engagement with the products and the retailer, while for the retailer it enables a greater understanding of the customer's choice, preferences and requirements. This again allows for a customised experience and a greater level of service.

Virtual Reality, on the other hand, is not restricted to the store environment; however, it requires the use of an additional device which needs to be worn by the user to experience the product of services. It enables an immersive experience with the products and the store being displayed three dimensions to the user. For the retailer, this can help gain important insights into the potential risks/success of various products without actually getting into commercial production.

Artificial Intelligence (AI)

Artificial Intelligence is defined as 'the practice of employing advanced analytical techniques and algorithms to train computers how to use data from a wide variety of sources and formats to accelerate, automate and augment decisions that drive growth and profitability".

Examples of Artificial Learning tools include speech recognition, machine learning, deep learning platforms, robotic process automation, text analytics and natural language processing to name a few. The applications in the world of retail would encompass customer experience, creating virtual trial room and digital assistance, the creation of bots, etc.

Chatbots

Chatbots are also known as virtual assistants, which help simplify the interaction between human beings and computers. A chatbot is an AI tool which simulates a conversation by way of a message, mobile application, telephone, etc. An understanding may be gathered on the basis of existing data, browsing history and purchase behaviour, to guide consumers to the purchase behaviour or resolve queries. Chatbots are often used by retailers to bridge the gap between online and offline experiences and are currently seen in the realm of answering customer queries, providing customer service and upselling to shoppers.

The term Internet of Things (IoT) encompasses all the items that we use in our day-to-day life which can exchange data and are optimised to suit our preferences. Applications of IoT in retail would include the areas of automated checkouts, receiving personalised discount messages, the use of beacons and in store layout optimisation tools to suit customer preferences, the use of robots in store and in the warehouse are a few examples of the same.

Blockchain

Blockchain technology, or what is also termed as 'distributed ledger technology' (DLT), offers a retailer immediate access to the complete transaction history at any point at any location. The immediacy of the availability of information is what is of significance to a retailer. It helps retailers track the origin of stock, which in turn gives them better control on the quality of the produce that they sell. It can also help retailers exercise a greater level of control in the supply chain as data of the manufacturing dates, and the location can also be tracked.

This brings in a level of transparency and helps eradicate the unreliable suppliers, poor quality ingredients among other things. In many cases, this level of tracking helps deal with issues pertaining to counterfeit products, especially in the case of luxury goods.

Apart from the above, blockchain technology is believed to help play a significant role in transforming loyalty programs. As the programs can be controlled in real time, it may help the retailer reduce costs as it may allow multiple interlinking networks to control how they wish their customers to interact with their own rewards program. It may also help the retailer keep track of customer warranties. It allows a view of the servicing that has taken place for a particular product across a multiple range of service providers, which may also be third party.

Role of Analytics in Retail

When meaningful patterns can be found in data, which are then analysed and interpreted to aid decision-making, it is termed as analytics. Typically, business organisations may use analytics to enhance business performance. In case of retail, analytics may be used at a predictive level in the areas of merchandising.

Merchandising Analytics

Often the merchandise assortment offered by a retailer varies from one point in time to another Merchandisers and retailers also look into discontinuing slow movers and adding new merchandise lines to enhance customer experience and sales. All of this has to be done keeping mund the constraints like the shelf space available which in turn affects the number of SKUs that can be stocked. Thus, questions like how will sales vary depending on the merchandise pocked, if customers do not find the product that they want will they opt for a substitute, which sore clusters should stock which variety of merchandise, need to be answered. Such decisions are difficult to say the least. While this can be done on the basis of experience and intuition, it may not always lead to the desired results. This is where the role of data and analytics comes in.

By identifying various attributes under each product category, which are important to the customer and using the current sales data. future demand can be estimated and at the same me areas wherein sales may be lost can be identified. This would help in better merchandise planning. Thus, a supermarket sells soft drinks of brand X. Y and Z and finds that brand Z contributes only 10 per cent of the sales. On the face of it, brand Z does not appear to have a large impact but when the sales data is mapped to the inventory levels and the size of the pack, in may lead to a different understanding of why sales are at 10 per cent only and helps in finding ways in which merchandise assortments can be optimised.

Marketing Analytics

In the context of a retailer, the purview of marketing analytics would fall in the domain of promotions, pricing, customer management and customer experience management. Given the fact that very often it is the price of the product which determines the purchase behaviour, it becomes an important analytical tool. Price of the product, hence, needs to be considered in conjunction with a promotion that may be offered on the product or the stage of the product lifecycle. At the same time, the elasticity of demand for the product also needs to be considered. Dynamic discounting can be adopted based on the price sensitivity of the product/s. At the same time based on the consumer's choice of products, specific promotions/ coupons can be targeted to achieve better results. Managing customers and the loyalty aspects can also be driven by analytics. By using tools of data mining, customers can be segmented, and specific promotions and campaigns can be developed.

Operations Analytics

Looking at it from the inventory management perspective, an analytics-based approach will help the retailer align the demand and supply. This can help reduce instances of excess/ shortage of inventory and and result in an overall improvement of the customer experience. The challenges in last mile fulfilment, controlling of logistics and fleet management can be addressed with the help of analytics. Similarly, analytics can help in the tracking the movement of the fleet, identifying hazard points and re-routing wherever required to help reduce the overall costs. The ability to track and predict delivery times can enable retailers to communicate the same with consumers and enhance a seamless shopping experience.

At the front end, it may help understand and optimise the staff performance and right sizing the staff, taking into consideration peak hour sales, store promotions and events. It can also aid in identifying patterns in shoplifting, which can be looked into by the store manager and steps taken to prevent the same. By using analytics to understand the consumer movement in the store, the retailer can understand the sections of the store which have the maximum traffic, and the zones where attention is needed.